Small firm in energy transition

The energy transition exposes the weakness of the current energy system of the world. It reveals how much we are reliant on a few resources to draw our energy to power the economy despite how dispersed and distributed energy resources are.

Take for example a rural area in Indonesia, where there are small farms and villages – and they are relying on diesel or kerosene refined and fetched from some far flung areas in order to power their generators or farm equipment. All the while just sitting beside heaps of bioenergy resources that are seen as waste.

The emphasis on low-carbon economy helps us recognise that we may have to start shortening our supply chains and reducing its complexity if we want to decarbonise our economies. Part of this has to do with how stuck we are between the CAPEX and OPEX distribution of the manner we consume energy. By consuming fossil fuels, we shift the burden of costs mostly to the OPEX since equipment are mostly standardised and so they are cheaper to procure and use while we adopt the long supply chains needed to achieve the delivery of fossil fuels on regular basis.

If we were to shift to shorter supply chains where the distributed energy resources were consumed instead, there might be more local equipment needed, the CAPEX might increase. But OPEX may actually decrease because now you’re saving on storage or disposal costs of some of the feedstock that might go into making the fuel you need.

If the world is to develop shorter supply chains, it will need more small firms. And governments all around the world needs to know better how to encourage, support and empower small firms to rise up to the challenge. We need local firms who are familiar with the local constraints, context and needs. They need to be upskilled technically to rise up to the challenge and generate solutions.

This mode of development is vastly different from the old school model of having a big multi-national firm come into a less developed location to help ‘develop’ it by reshaping local demands. Aside from how much this harks back to colonialism, it is creating long supply chains which seem to create more jobs but is not doing much for the climate and environment.